David Kostin of Goldman Sachs thinks the benchmark index’s valuation is “lofty by almost any measure.”

He writes that the current price-to-earnings multiple on the S&P 500is about as high as it can get under these current conditions, both as measured by the aggregate index (15.9 times) and the median stock (16.8 times).

Randy Frederick, a managing director for active trading and derivatives at Charles Schwab said that markets have been trading mostly sideways in the past several sessions with reactions to both good news and bad news mostly subdued, as most investors now focused on earnings results.

“Markets believe that the December jobs data were disappointing primarily due to cold weather and investors think the number is likely to be revised upwards. Given all other indications suggesting improving hiring conditions, such as ADP and manufacturing data, the number of new jobs will be made up in the next month,” Frederick said.

Speaking of valuations he said he disagreed with Goldman Sach’s view that the S&P 500 is too overvalued.

“We look at 12-months trailing PE ratios rather than forward-looking ones, and at roughly 19.5 that number, while slightly higher than historical average, seems not terribly high. Even if earnings do not rise as much as we expect, there is still room for a slight PE expansion.”

“The most disappointing number from Friday’s Employment Report was not the miss to jobs growth expectations (74,000 versus the hoped for 200,000), but rather the continued precipitous decline in labor force participation,” wrote Nicholas Colas, chief market strategist at ConvergEx Group, a global brokerage company based in New York.

At 62.8%, this measure of people actually working or looking for employment has slumped back to the levels of the 1970s economic malaise. More importantly, the trend here has outstripped the U.S. Government’s forecasts, which only called for such a level around 2020. January 2013 may not see any improvement if Congress does not extend emergency unemployment benefits, with participation dropping further if the long-term unemployed chose to exit the workforce as a result. That would leave the Fed with an unwelcomed communications problem: quickly drop the 6.5% threshold unemployment rate from its monetary policy, or risk being seen as out of touch.

Alnylam Pharmaceuticals Inc. soared 52.2% making it the best performing stock on the S&P 500, after reports that the U.S. based drugmaker agreed to sell a 12% stake to Genzyme Copr, the biotech unit of Sanofi for $700 million.

From the WSJ report:

Genzyme and Alnylam, a biopharmaceutical company based in Cambridge, Mass., will jointly develop and sell a new experimental drug being developed to treat familial amyloid cardiomyopathy, a rare genetic heart disease, now in Phase 2 of clinical trials.

Technology stocks are leading gains on the S&P 500, with the heaviest-weighted Apple, Inc rallying 1.8%.

Juniper Networks jumped 8.16% after shareholder Elliott Management, presented a plan that it said would lift the stock to $35 to $40 a share through share buybacks, reducing expenses and streamlining its business operations. Twitter shares were also on the rise, gaining 3%.

“Finally, while we continue to advocate that investors remain underweight Treasuries, we would point out that some segments of the Treasury market look more attractive than others.” Namely, he says “long-dated Treasury bonds with yields of around 3% to 4% no longer look as overvalued as they did one year ago.”

The Treasury Department just released its report on December budget: the government recorded a surplus of $53 billion, nearly $40 billion of which are payments from government-controlled mortgage giants Fannie Mae and Freddie Mac.

2) While active management is improving, don’t dump your index ETFs, says Barron’s Brendan Conway. History suggests any advantage could be fleeting, and the source of any outperformance is debatable, he writes.

Chaning Smith, managing director at Capital Advisors, said that markets are playing catch-up with the bond market, finally realizing that the jobs numbers were fairly bad.

“People are taking profit after digesting the poor jobs figures. Investors are also nervous ahead of earnings releases from the banks tomorrow and if the results miss expectations, there will be a lot more pressure on the markets.”

J.J. Kinahan, chief strategist at TDAmeritrade echoed such view, saying markets are having a delayed reaction to the jobs data.

“When payroll numbers came in, we all thought that the first digit was missing, then realized that it was just 74,000. Market reaction to that number on Friday was anomalous, as they shrugged them off.

Today buyers that usually came in the afternoons were absent and people were taking profit and lightening their positions in an anticipation of earnings results.”

Charter Communications is offering $132.50 a share for Time Warner Cable, according to Dow Jones headlines that hit in the last few minutes.

Back in November, there were indications that something like this would happen. Here’s an excerpt from one article:

“Charter Communications Inc. is nearing an agreement with banks to borrow money for a bid for Time Warner Cable Inc., according to people familiar with the situation — a sign that the scrappy cable operator’s effort to engineer a combination of the two companies may be moving into high gear.”

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